A coalition of U.S. Senate Republicans, spearheaded by Senator Cynthia Lummis (R-WY), has formally requested that federal financial regulators reevaluate and eliminate the 1250% risk weight currently applied to digital assets under the international Basel Framework. In a letter sent last week to Federal Reserve Vice Chair of Supervision Michelle Bowman, FDIC Chair Travis Hill, and Comptroller of the Currency Jonathan Gould, the lawmakers argued that the existing capital requirement is excessively punitive and effectively bars banks from engaging with the digital asset ecosystem.
The Basel Committee's 1250% risk weight forces banks to hold a dollar of capital for every dollar of crypto exposure, far exceeding requirements for traditional assets like equities or corporate bonds. This has been widely criticized as a de facto prohibition on bank custody, trading, and lending against digital assets. The senators urged regulators to craft a new, technology-neutral capital framework that accurately reflects the opportunities and risks of digital assets, allowing banks to participate meaningfully while maintaining prudent risk management.
If successful, the change could unlock billions of dollars in institutional capital, enable banks to offer crypto custody and trading services, and potentially facilitate stablecoin issuance. The move signals growing legislative support for clearer, more innovation-friendly crypto regulations. However, any regulatory shift is expected to be gradual, as it would need to align with international standards and be adopted by U.S. agencies. The letter also referenced a March joint statement from the FDIC, Fed, and OCC that tokenized securities should receive the same capital treatment as non-tokenized forms—a principle the lawmakers argued should apply consistently to all digital assets.
The push coincides with broader congressional efforts to pass digital asset legislation that would explicitly authorize banks to conduct on-balance-sheet activities with crypto, creating an urgent need for updated capital guidance.
